China has relaxed its rules pertaining to foreign direct investment by removing foreign ownership limits of motorcycle and batteries manufacturers.

The revised policy applies to foreign firms setting up in the four pilot free trade zones, namely, Fujian, Guangdong, Shanghai, and Tianjin, according to the State Council circular, which was dated on July 1 and publicized on Tuesday.

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Foreign investors such as Yamaha Motor Co. and Samsung SDI Co. were previously required to partner with domestic firms and could only own as much as 50 percent of the venture.

"This will attract more foreign electric vehicle battery makers to set up subsidiaries in China and help the country bridge gap between its own production capacity and growing demand," Hannah Li, a UOB Kay Hian strategist, said.

The exemption comes after sales of motorcycles dropped by 15 percent in the first half of the year. However, China has not included overseas automakers, which are still subject to the same 50:50 investment limit rule, according to Bloomberg.

While the move will heat up competition against local players such as BYD, it will also indirectly benefit domestic electric vehicle manufacturers as the cost of imports would be reduced.

Furthermore, the state council circular also got rid of a regulation requiring overseas oil companies need to have a Chinese controlling partner if they are operating over 30 fuel stations in China, thus allowing foreign companies to establish a wholly-owned stations in the four trade zones.

It also permits foreign firms to set-up wholly-owned ocean shipping transport companies in theShanghai free trade zone.

Meanwhile, China's central government revealed that necessary and timely revisions to the policy would follow based on the results of the trial operations.

Tagsbattery makers, motorcycle makers, china, Yamaha Motor Co, Samsung SDI Co., free trade zone, BYD